Harvard Business grads say U.S. economy is 'less competitive'

A new survey released recently which scoped out the thoughts of Harvard Business graduates indicates that most view the United States as increasingly less competitive in the global marketplace.

The survey, entitled "Prosperity at Risk", was authored by Michael E. Porter, and Jan W. Rivkin, both Harvard Business School professors, and received over 9,700 responses from alumni in Oct. 2011 which contributed to the report.

The authors cited the respondents as being a "diverse" group of leaders, which included 2,500 in senior leadership positions. Additionally responses came from 49 states and 121 countries in multiple industries and the age range for those who completed the survey was 24 to 99 years of age.

The authors state in their executive summary, the in-depth survey concludes "a multi-year project on U.S. competitiveness, which aims to lay out facts and realities of international competition and implications for the U.S. in a nonpartisan way."

Harvard examined the position and trajectory of the U.S. as a global competitive location.

Survey results showed 71 percent of respondents anticipated the U.S. to become less competitive and less able to compete on a global level, with U.S. companies unable to pay strong wages and benefits. Unemployment is already a concern and the economy is a "top issue" in the upcoming U.S. presidential election (Reuters).

"The U.S. is losing out on business location decisions at an alarming rate, and those activities being offshored are more job-rich than those coming in," said Michael Porter, a Harvard Business School professor who was a co-author of the study.

Many of the top issues cited were attributed to "political gridlock", intricacy of U.S. tax codes, and a weak education system for K-12, said the survey's respondents. Although respondents did feel that higher education is a strength and gives the U.S. a competitive advantage.

The authors point out that the media, campaigning politicians and Congressional debates focus on recession recovery, and point to recreating lost jobs will fix the floundering economy. The duo says this isn't the root issue. Porter and Rivkin say these discussions are missing a fundamental issue which extends far beyond jobs.

Porter and Rivkin indicate in their report, "Ample evidence now points to a series of structural changes that began well before the Great Recession and threaten to undermine the long-term competitiveness of the United States."

Competition is a central theme throughout the report. The authors argue that government cannot fix the problems alone, that business plays a key role and competition is a primary factor.

Yet the majority of the individuals surveyed said they would be more likely to move their company's operations out of the U.S. rather than back in. Interesting to note, statistics collected indicated many of the jobs being moved out of the U.S. are in areas such as research, development, and engineering (42 percent).

Authors said, "If the survey participants are representative, then, job rich facilities involving high-end work and multiple functions are moving out of the U.S. much faster than they are moving in, a compelling sign that the United States has a competitiveness problem."

Many of the respondents said they felt the U.S. was falling behind emerging nations such as China, Brazil, Eastern Europe and India, and said "many of those countries were attractive because workers there can be paid lower wages." (LA Times)

The study suggests the federal government has let the country down in its handling of these matters, however businesses are also to blame, even for some issues that appear to be related to public policy. As an example, Porter and Rivkin stated businesses "relentlessly pushed for loopholes and subsidies that serve narrow self-interest," rather than what would be good for the overall nation.

"We believe that business leaders must lead the way in making the choices that will build America’s ability to compete rather than erode it," the duo penned.

In conclusion they said there is no "silver bullet" and the problems currently plaguing the nation are more complex than the unemployment situation.

“Business leaders and policy makers in America must find ways for Americans to work smarter and more productively than workers who are paid lower wages overseas,” the authors said in their report. Porter and Rivkin also noted that the current dismal outlook can be reversed by focusing on U.S. strengths such as higher education, entrepreneurship and innovation.

The full analysis of critical areas that drive U.S. competitiveness will be shared in the March 2012 issue of Harvard Business Review, along with "action agendas" to restore "America’s economic vitality".

Bloomberg's Business Week reported yesterday that over 90 percent of U.S. metropolitan areas have not been able to effectively recover from jobs lost during the recession. This comes from a report issued by forecaster IHS Global Insight and released by the U.S. Conference of Mayors.